CHINA'S MANUFACTURING SECTOR DECELERATES

China's National Bureau of Statistics will release its June
manufacturing PMI report. The headline number crossed Bloomberg
at 8:59 p.m. ET.

The headline number fell to 50.1 from 50.8 in May.

This was right in line with expectations.

Any reading below 50 signals contraction, so this deteriorating
number reflects just marginal expansion.

China is the world's second largest economy and one of the
remaining engines of global growth.

Here is a breakdown of the last two month's PMI reports:

June 2013

May 2013

PMI

50.1

50.8

Output

52.0

53.3

New orders

50.4

51.8

New export orders

na

49.4

Backlog of work

na

44.9

Inventories of finished goods

na

48.6

Purchases quantity

na

51.5

Imports

na

50.3

Input prices

44.6

45.1

Inventories of raw materials

47.4

47.6

Employment

48.7

48.8

Supplier delivery times

Business Activity Expectation

50.3

54.1

50.8

56.3

Earlier today, we learned that
South Korean exports unexpectedly contracted in June. Korea
is facing its own challenges, especially as its currency
strengthens substantially against the Japanese yen. Still, its
exports are hugely exposed to mainland Asia, and is therefore
sensitive to demand out of China.

All of this comes as interest rates rise in China, signaling
financial stress. For the most part, China and its central
bank has been standing by quietly.